China and the Canadian Dollar

Discussion in 'Economics' started by rbursell, Oct 20, 2010.

  1. rbursell


    Hi all,

    I'm an Economics newbie, but I am really interested in how the global economy works. Recently, China raised it's interest rate to "reign in surging economic growth". Is this true? Why would the Chinese government do that? To avoid inflation?

    Also, this seemed to impact the value of the Canadian and Austrailian dollars. Is this because, as resource based economics, raw materials are affected? If so, how. How does this relate to exports/imports and what impact does it have on interest rates and the world economy in general?

    One last question, sorry, a few more questions. These are obviously unusual times ... I know noone can predict what will happen in the future and if this situation has not happened before - with interest rates soo low and the global impact of economies - how can we use economics to help us predict the future? Are there certain principles that hold true under any conditions?

    When will the US economy rebound? Will it get worse before it gets better? Why has the Canadian economy not suffered as much as the US economy, which I believe was expected. Will it catch up with us? Are mutual funds still a good investment strategy. How can a person plan for retirement, say, in 20 years, in this time of uncertainty?

    I know these are alot of questions, sorry, I got a little out of hand.

  2. Many questions indeed.

    1. Yes, to keep inflation in check.

    2. The CAD took a hit because if China raises rates which cools growth, demand for commodities will be hampered. As you've alluded to, Canada and Australia are resource based economies. Also due to general USD strength.

    3. Certain economic principles will stand the test of time (i.e. supply and demand) while others are up for debate.
  3. Roark


    Actually, predicting the future is quite easy. People do it all the time. The difficulty is in the accuracy of the predictions.
  4. You also have to worry about your prediction changing the outcome of your trade.. especially true in Finance, and at the racetrack...